Adidas, the renowned German sportswear giant, has announced it will implement price increases for American consumers due to an expected €200 million (£173 million) rise in tariff costs. The company, which sources nearly 50% of its products from Asian manufacturers, is grappling with the direct financial implications of new trade agreements between the US and Vietnam, as well as Indonesia.
In a recent statement, Adidas chief executive Bjorn Gulden voiced uncertainty regarding how the new tariffs will influence customer demand, especially if they lead to significant inflation in the market. The majority of Adidas products come from Vietnam, accounting for 27% of its offerings, and from Indonesia, which makes up 19%. With the new tariffs, the US has imposed a 20% levy on Vietnamese goods and a 19% tariff on products from Indonesia, impacting the companies importing these goods.
Despite these tariff challenges, Adidas reported a robust 7.3% increase in sales, reaching €12.1 billion in the first half of the year, alongside a dramatic rise in pre-tax profit, which surged from €549 million to over €1 billion. The company's footwear segment saw a 9% sales increase in the second quarter, while clothing revenue soared by 17%.
Adidas is not alone in facing such tariff-related pressures. Nike had previously indicated it would raise its prices for US consumers due to similar tariff concerns and estimated the rising costs could add roughly $1 billion (£730 million) to its expenses.
In a broader context, these tariffs have been part of a strategy initiated by former President Trump, aimed at encouraging domestic manufacturing. The US has also recently agreed to impose a 15% tariff on all imports, raising concerns across various industries, including automotive, where major brands have reported significant impacts due to increased import taxes.
As Adidas looks ahead, the combination of rising costs and the uncertain economic climate poses a potential challenge to its ongoing success and customer retention in the US market.
